Fair value measurement capabilities, disclosure, and the perceived reliability of fair value estimates: A discussion of Bhat and Ryan (2015)

Fair value accounting: Perspective on stewardship function

“…For example, Bhat and Ryan (2015) find that banks" market risk and credit risk modelling improve the value relevance of their fair value gains and losses, in particular for less liquid instruments. In response, McDonough and Shakespeare (2015) suggest that risk modelling may improve the faithful representation of fair values by reducing estimation error. They continue by noting that risk modelling activities may result in "fair value estimates that are more verifiable and understandable to investors" (McDonough and Shakespeare, 2015: p. 98).…”

The Impact of Fair Value Accounting on Earnings Predictability: Evidence from Jordan

“…Therefore, it is important to make a decision to resolve this difference because many companies that use fair value accounting have to record their assets and liabilities in difficult circumstances, such as the market crash, which makes the financial statements of these companies appear much worse than they really are. Since the purpose of financial statements is to clarify the financial condition of the company and its activities during the financial year and allow users of financial data to forecast future cash flows of the company, when the market collapses and the values of assets and liabilities appear below their actual value, this leads to distortion of the financial position of the company and it appears unable to achieve its intended goals (McDonough & Shakespeare, 2015).…”

“…However, this approach becomes less reliable over time and does not have the ability to make reliable decisions once a certain period after the occurrence of the event has passed. This is because the financial reports depend on historical records of assets and liabilities, lack up-to-date information on current values, and the historical cost includes a set of assessments, assumptions and different postulates with which it is not possible to make highly accurate comparisons (McDonough & Shakespeare, 2015).…”

La medición a valor razonable en activos fijos. Caso empresas de servicios públicos domiciliarios cotizadas en Colombia

“…Los defensores de la relevancia priorizan la información para la toma de decisiones basada en las necesidades de los inversionistas y, por ende, están a favor de las mediciones al VR (Biondi, 2011). Por su parte, los defensores de la conabilidad, plantean que el VR abarca información subjetiva, lo que implica propensión a la volatilidad y a errores, generando informes poco ables (Bignon, Biondi, & Ragot, 2009;McDonough & Shakespeare, 2015).…”

“…Por su parte, los defensores del VR argumentan que este modelo permitió develar los problemas de las crisis, los cuales podrían haber sido peores sin la existencia de esta medición. Sin embargo, admiten que se requiere mayor revelación de información sobre las metodologías utilizadas en las mediciones a VR para mejorar la transparencia (McDonough & Shakespeare, 2015).…”